Lifestyle Creep and Living a Life You Can Afford

By Priya Malani, Stash Wealth

June 8, 2017

If you’re in your 20s or 30s and you get your [financial] sh*t together now, you WILL be a millionaire – a multi-millionaire in fact! At Stash Wealth, all day, every day, we show H.E.N.R.Y.s™ how to turn their income into serious wealth without giving up the things they love to do today. More often than not, getting on track with your finances involves little to no compromise, especially when you’re young. But there’s an exception to this rule.

Every so often, we come across an individual or couple that’s living a lifestyle beyond what they comfortably can afford. They suffer from something we call lifestyle creep and it’s usually not a huge shock when we bring it to their attention.

Signs of Lifestyle Creep

1) A credit card balance that you can’t pay off at the end of the month.

2) Little to no savings relative to your income and cost of living.

How does this happen? Usually, it doesn’t happen overnight. Lifestyle creep is like aging, you don’t notice it along the way.

But The Joneses Are My Friends

You know the Joneses. Their Facebook walls are covered with photos of them taking exotic trips and eating out night after night. Sometimes you wonder “how the hell do they have that kind of money?” From our experience, even if you aren’t hanging out with them all the time, you feel some level of pressure to keep up. It can be insanely expensive to have them as friends – but we aren’t suggesting you drop the Joneses from your social calendar. We are, however, suggesting you think twice about how they influence your decisions because, in the end, lifestyle creep only hurts you – not them.

What You Don't Know About The Joneses

The Joneses are victims of lifestyle creep themselves. We can say, without any hesitation, that the Joneses have very little in savings and have a credit card balance that they don’t pay off in full at the end of the month. The Joneses haven’t thought about tomorrow – they are living for today. And when tomorrow rolls around, they won’t be prepared. It’s up to you to decide if being prepared for the future is important to you. There’s no magic or shortcut. The key to being prepared for tomorrow is planning today.

How Do I Know What I Can Afford?

When they come to us, most of our clients think they’ll never be good with money because they are bad at budgeting. We’ve said it 1000 times, budgeting doesn’t work – it’s not how you get ahead. The secret is to save first! To reuse an overused Stash quote:

“Don’t save what’s left after you spend, spend what’s left after you save” -Warren Buffet” and Stash Wealth x 1000

We call it the Reverse Budget™ or Save First, Blow The Rest

Once you figure out what you’re saving for, you’ll know how much you need to save and where. What’s left, is yours to spend – that’s how much you can afford. A general guideline is that 20% of your income should be going towards the future – short, mid, and long-term goals. 80% of your income is yours to spend on life. From that 80%, you have to figure out rent and everything else. If you’re still living paycheck to paycheck, you may not be able to hit the 20% guideline right away, but it’s something to work towards!

Getting Back On Track to a Life You Can Afford

Do you have a sneaking suspicion that you might be living a life you can't afford? It’s not too late to change course. A good way to start is to figure out where your money is going. Don’t gloss over that last sentence. Yes, we know…you know where your money is going and there’s no place to cut back.

Humor us and take one week and write down everything you spend. Even if you’re right and there are no surprises, it’s a good way to get reacquainted with your lifestyle and it will come in handy down the road when you are trying to look back to see if you are a victim of lifestyle creep.

Also, it gives you a really good read on how much you need to be earning to support your lifestyle. There are really only two ways to get ahead, earn more or spend less. Earning more is a lot more fun.

Getting back on track isn’t painless but it’s a lot less painful than setting yourself up for a lifestyle of compromise because you didn’t take the time to do the hard work now.

Good luck and we are here to help!

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Priya Malani is an entrepreneur and founding partner at Stash Wealth, a financial planning firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet]. After years of working on Wall Street, Priya left to work with Millennials, who are largely ignored by traditional financial firms. Stash’s clients are 20 + 30-somethings who make good money and want something to show for it. In addition to running Stash, Priya serves as the Resident Financial Expert for Refinery29. She is a featured expert on numerous sites including Gawker, The Coveteur, Shape Magazine, Bustle, PureWow, Brit + Co and Forbes. She speaks regularly at business and universities around the country and has been invited to speak at Cornell, Harvard, New York University, Yelp, Twitter, Blue Apron, IBM and more. She appears regularly as the Millennial Money Expert on SiriusXM Radio’s Wake Up With Taylor broadcast.